How to Increase Your Borrowing Capacity

Looking to take out a loan for a residential or commercial property but finding that your borrowing capacity isn’t quite where you need it to be? Don’t worry, there are plenty of steps you can take to increase your borrowing capacity and secure the financing you need.

Here’s a detailed guide to help you get started:

1. Boost your income

One of the most effective ways to increase your borrowing capacity is to boost your income. Consider taking on a side job or freelance work to supplement your income, or negotiate a raise or promotion at your current job. The higher your income, the more borrowing power you’ll have.

2. Reduce your debts

Lenders take into account your existing debts when calculating your borrowing capacity, so it’s important to pay down or eliminate as much debt as possible. Start by paying off high-interest debts such as credit card balances, and consider consolidating debts into a single loan with a lower interest rate.

3. Improve your credit score

Your credit score is another key factor that lenders consider when assessing your borrowing capacity. Make sure to pay all bills on time, reduce your credit utilisation ratio (the amount of credit you’re using compared to your credit limit), and dispute any errors on your credit report. A higher credit score can mean a higher borrowing capacity and lower interest rates.

4. Save for a larger deposit

Lenders typically require a deposit of at least 20% of the property’s value for residential loans or 30% for commercial loans. Saving up for a larger deposit can increase your borrowing capacity by reducing the lender’s risk and demonstrating your financial stability.

5. Consider a guarantor

If you don’t have a large deposit or a high income, you may still be able to increase your borrowing capacity by enlisting a guarantor. A guarantor is someone who agrees to pay back the loan if you’re unable to, and can be a family member or friend with a strong financial position.

6. Explore different lenders and loan products

Not all lenders and loan products are created equal, so it’s important to shop around and compare your options. Consider working with a mortgage broker who can help you find the best loan for your needs and financial situation.

Perry Finance can help you explore the best lenders and loan products available to increase your borrowing capacity

At Perry Finance, our award-winning brokers will go above and beyond to help you improve your financial situation, increase your borrowing capacity and get one step closer to securing the residential or commercial loan you need. Partnering with an expansive panel of the best lenders on the market, we’ll work closely alongside you to secure the most ideal loan product.


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